Question

a company is in its first month of operations. The company performed $2,000 worth of services on January 28. The company expects to receive payment on Feburary 15. What adjusting entry would be made at the end of January? Posting the adjusting entry for the scenario provided.

Answer 1

Explanation:

Since the company performed services worth $2,000 on January 28 but will not receive payment until February 15, an adjusting entry is needed at the end of January to recognize the revenue earned in January. The adjusting entry would be as follows:

Date: January 31, 20XX

Accounts Receivable - $2,000

Service Revenue - $2,000

The above adjusting entry increases the revenue for the month of January by $2,000 and creates an account receivable for $2,000, representing the amount the customer owes the company for the services performed.

After the adjusting entry is posted, the income statement for the month of January will show $2,000 of service revenue, and the balance sheet will show $2,000 of accounts receivable.

It's important to note that this adjusting entry assumes that the company uses the accrual method of accounting, which recognizes revenue when it is earned, regardless of when payment is received.